In the context of the electricity sector, deregulation signifies that electricity generation will be subject to market competition. Meanwhile, the transmission and distribution of electricity will remain under regulatory control, with local utility companies still responsible for delivering electricity and offering customer services.

Energy deregulation empowers consumers by allowing them to choose among various providers. It disrupts utility monopolies, which may neglect consumer needs, and fosters a more adaptable market that can readily adopt new technologies and sustainable energy solutions.

Deregulation has both advantages and disadvantages. On one hand, it can boost economic growth, enhance competition, and provide more options to consumers. On the other hand, it may lead to inadequate regulation of vital industries, job displacement, and potential price increases for consumers.

While deregulation has benefits like fostering economic growth and reducing prices, it also carries risks, including compromised quality control, the potential emergence of monopolies, and the possibility of market instability or failure.

A total of 17 states have implemented some degree of deregulation in their energy sectors. This includes states like California, Connecticut, Texas, New York, and 12 others, each with unique deregulation policies and structures.

The essential difference lies in market competition: deregulated markets foster competition among electricity suppliers, while regulated states allow utilities to maintain monopolies over the electric system.

The US began deregulating the energy sector in 1977 through the establishment of the Federal Energy Regulatory Commission (FERC). This bold move allowed individual states to take control of their energy supply decisions.

Historically, regulated markets were the norm in the US, limiting consumer choice. It was the 1970s Public Utilities Regulatory Policies Act that marked the start of restructuring, transforming the landscape of the energy industry.

The process began in the 1970s with the enactment of the Public Utilities Regulatory Policies Act (PURPA) in 1978. Amid an energy crisis, this act set the stage for a new era in energy market regulation.

Consumers may see benefits from deregulation, such as reduced operational costs, more market entrants, and lower prices. These changes can enhance efficiency and contribute to broader economic expansion, as noted by institutions like the U.S. Securities and Exchange Commission.